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South Asia Investor Review is focused on reporting, analyzing and discussing the economy and the financial markets of countries in South Asia, including Pakistan, Bangladesh and Sri Lanka. For investors looking to invest in emerging markets beyond BRIC countries (Brazil, Russia, India and China), this blog is designed to help international investors looking to learn about investing in South Asia with focus on Pakistan. Riaz has another blog called Haq's Musings at http://www.riazhaq.com

Can India-born CEO Satya Nadella Save Microsoft in Post-PC Era?

Microsoft, the world's largest software company, has named Satya Nardella, an Indian-American company veteran of 20 years, as its new CEO to replace its long-time leader and Bill Gates' pal Steve Ballmer. It's clearly a matter of great pride for not only his fellow Indian-Americans in the United States but also in India, Nadella's country of birth. I offer my sincere congratulations and best wishes to Mr. Nadella and his fellow Indians who are celebrating it as their own success. The question on everyone's mind now is whether he has what it takes to bring back the Wintel-era glory to Microsoft.

Wintel Era:

Wintel (Windows+Intel) represented the most successful period for Microsoft and its partner Intel when the two companies together made history with the personal computer revolution.
Working for Intel as an engineer in 1980s and 1990s, I had a chance to work with both Microsoft and Intel executives to help bring about the PC revolution. Both companies offered products that worked well together to address the needs of hundreds of millions of PC users in that period. Both companies enjoyed phenomenal growth and high profit margins. I met Bill Gates several times in the two decades at frequent Intel-Microsoft executive meetings. I also got a chance to work with other Microsoft executives including Paul Maritz, Rob Glaser, Nathan Myhrvold, Carl Stork and others.

One particular incident with Bill Gates that I remember was at the 80486 CPU launch event at McCormick Place in Chicago. Gates insisted on doing the 80486 CPU demo at the event. Gates was a real geek at the time. He showed up wearing a rumpled shirt. His hair was uncombed. As he began the rehearsal under a spotlight aimed at the stage, he started complaining that he couldn't see under its glare. Intel marketing manager suggested to him to not look directly into the light to avoid it. Somehow we got through the rehearsal and, later, the actual launch in front of the media and the analysts went quite well.

The Wintel duopoly enabled both Intel and Microsoft to increase performance, bring down prices and still enjoy unprecedented profitability in the computer industry. Dave House, Executive VP at Intel in charge of microprocessor business, put it best when he told me and my fellow 80386 CPU engineers in 1985 that "making 80386 microprocessor chips is like printing money". He went on to explain that "it costs more than 10 cents for the US govt to print a dollar bill but Intel's cost of printing 80386 chips is less than 10% of its average selling price". I believe Microsoft made even bigger profits with DOS and Windows operating systems and PC applications in 1990s.

RISC Challenge:

Wintel partnership came under severe strain in 1992-93 when Microsoft decided to build its Windows NT operating system to run primarily on Reduced Instruction Set Computing (RISC) processors from DEC and MIPS. Intel's CISC (Complex Instruction Set Computing) X86 architecture-based processors were considered by many as old and uncompetitive relative to RISC. RISC processors came with a reduced set of simple instructions executable within a clock period, lots of registers, more cache memory and powerful compilers which Intel x86 based CPUs lacked at the time. Intel responded to the challenge by offering much higher clock rates, larger cache memories, improved instruction pipelining, multiple execution units and highly optimizing compilers which made more efficient use of the limited number of registers and better instruction scheduling on the Intel processors. I was assigned the role of a program manager at Intel to work with Microsoft to optimize Windows NT for 80486 at the time. It was interesting to watch the competing arrogant management styles of the two companies on full display during this effort. Needless to say, Intel beat back the RISC challenge and went to become the world's largest and most profitable chip company.

PC Era Over:

The world has dramatically changed since the 1990s when Wintel ruled the roost. PC is no longer the dominant device. Smartphones and tablets have brought the era of mobile cloud computing where neither Intel nor Microsoft enjoy leadership position. Even developing like Pakistan are deploying cloud computing applications. A Google sponsored survey in Pakistan found that mobile computing is expected to overtake desktop computing this year. Several new and more innovative and powerful players have emerged to in this market. It is this new reality that stares Staya Nadella in the face.

Decline of Empires:

In a recent New York Times column, Nobel Laureate economist Paul Krugman compared the decline of Microsoft to the fall of the great empires of the past. Drawing upon the lessons of Medieval Muslim historian Ibn Khaldun, Krugman wrote:

"How could Microsoft have been so blind? Here’s where Ibn Khaldun comes in. He was a 14th-century Islamic philosopher who basically invented what we would now call the social sciences. And one insight he had, based on the history of his native North Africa, was that there was a rhythm to the rise and fall of dynasties.
Desert tribesmen, he argued, always have more courage and social cohesion than settled, civilized folk, so every once in a while they will sweep in and conquer lands whose rulers have become corrupt and complacent. They create a new dynasty — and, over time, become corrupt and complacent themselves, ready to be overrun by a new set of barbarians.
I don’t think it’s much of a stretch to apply this story to Microsoft, a company that did so well with its operating-system monopoly that it lost focus, while Apple — still wandering in the wilderness after all those years — was alert to new opportunities. And so the barbarians swept in from the desert".

Conclusion:

Krugman's comparison of today's Microsoft with ancient dynasties seems to make a lot of sense. The "Wintel" dynasty is being overthrown by hordes representing cloud computing "barbarians and tribesmen" at Apple, Google, Amazon and a whole bunch of other tech companies. Can a Microsoft lifer like Staya Nadella, steeped in Microsoft's established culture, fend off the "barbarian at the gates"? If I were a betting man, I'd say No! But let's wait and see.

Comments

SAN FRANCISCO -- After compiling a list of more than 100 CEO candidates, Microsoft settled on Satya Nadella a home-grown leader who joined the software maker in the early 1990s. That's back when Google's founders were teenagers and Facebook CEO Mark Zuckerberg was in elementary school.

Tuesday's hiring of Nadella as Microsoft's CEO after a five-month search is a safe move that's likely to be greeted with sighs of relief around the company's Redmond, Wash. headquarters, industry analysts say. But the methodical, almost predictable decision is likely to reinforce perceptions that Microsoft Corp. is a plodding company reluctant to take risks as it competes against younger rivals who relish going out on a limb.

While Google founder and CEO Larry Page boasts about his company taking "moon shots" and Zuckerberg promises to "move fast and break things," Microsoft has fallen behind the technological curve after underestimating the importance of Internet search more than a decade ago and reacting too slowly to the rise of mobile devices during the past seven years. Meanwhile, the sales of personal computers running on Microsoft's Windows software are shrinking.

Microsoft's malaise may have narrowed the field of up-and-coming visionaries interested in running a company founded in 1975.

Just as Microsoft founder Bill Gates and Apple Inc. founder Steve Jobs would never have considered working at IBM Corp. in the 1980s, today's entrepreneurial whiz kids scoff at Microsoft's overtures.

"Going to work at Microsoft could make it look like you are going back to the dark ages," says Richard Metheny, a management coach for the executive search firm Witt/Kieffer in Chicago. "It's a well-entrenched business that has had trouble lately figuring out how to play in this new world."

Despite its challenges, Microsoft remains a moneymaking machine that sits atop an $84 billion cash pile. That alone should have been enough to tempt technological sharpshooters to take a shot at turning around the company, says Dennis Carrey, vice chairman of executive recruiting firm Korn Ferry and co-author of the book, "Boards That Lead."

Microsoft "is like a car that still has a full tank of gas, but it's just an old model," Carrey says. "There are a lot of great tech executives who yearn for that kind of challenge, especially with a bucket of cash to make acquisitions and do some really fun, cool stuff."

----------There was some speculation that Microsoft might be interested in hiring Sundar Pichai, a respected Google executive in charge of the company's Android and Chrome operating systems.

But it's likely that Microsoft would have had trouble persuading a Silicon Valley star to become its CEO. That's because much of Silicon Valley dismisses Microsoft's products as too complicated and expensive. There is also still a residue of resentment from the late 1990s when Microsoft's aggressive attempts to thwart the growth of Web browser pioneer Netscape Communications instigated an antitrust case, a suit filed by the U.S. Justice Department at the urging of a Silicon Valley coalition.

"When it came down to it, I don't think the Microsoft board could find the CEO that fit the profile it really wanted from outside the company," Moorhead says.

Once Microsoft decided to take the insider route, Nadella emerged as an obvious choice, Korn Ferry's Carey says. "Only history will tell us whether it was the right choice."...

Bad news for India’s future brain drain: according to a new survey by the Economist and mobile phone messaging platform Nimbuzz, 57% of Indians between the ages of 18 and 22 would emigrate to America if they had the chance. Interestingly for India, which is expected to have the world’s youngest workforce by 2020, the reasons aren’t entirely related to the country’s struggling economy—violence and corruption are also big worries.

Despite the global financial crisis in 2008, economic growth in India had prompted observers to hail the advent of a reverse brain drain of top students, scientists, and entrepreneurs. But that doesn’t look so good now. India’s economy is in its sharpest downturn in a decade, growing just 4.5% last year.+As of May 2012, the government estimates that about 21 million non-resident Indians live outside their home country, or about 1.7% of the India’s population of 1.27 billion. That’s a slight drop from the previous estimates of between 25 million to 30 million Indians living abroad, but still signals a drain of talent and money. The wealth of Indian expatriates has been valued at as much as $1 trillion, according to Datamonitor.

Elastica, a cloud security startup launched in 2012, is coming out of stealth mode with $6.3 million in Series A funding from the Mayfield Fund. The startup is also launching its new apps that offer real-time threat detection and even post-incident forensic analysis.

As more enterprises embrace SaaS and other cloud-based services, they are increasingly feeling the need to have a different approach to security beyond just traditional firewalls. This shift means over $2 billion annual market for cloud security vendors like Elastica. As Gartner noted last year, the highest growth is forecast to occur in cloud-based tokenisation and encryption, security information and event management (SIEM), vulnerability assessment and web application firewalls.

Elastica joins a fast growing club of cloud security startups promising to combine data science and in some instances even machine learning tools to help companies and employees secure SaaS data. There’s huge investor interest in the segment and some of the biggest names in the enterprise software world are backing many of these startups.

Elastica was founded in 2012 by Rehan Jalil, former CEO of WiChorus, which was sold to Tellabs for $165 million in 2009.

As Pakistan’s business community becomes more adapt with cloud technology and seeks more cloud-based solutions for growth, Microsoft is expanding its operations in the country in a bid to increase its enterprise customer base.“Our initial focus in Pakistan was primarily on the corporate sector. However, as the cloud computing segment in Pakistan is now growing rapidly, we are expanding our operations in Pakistan, with a new strategy of Cloud first – Mobile first,” company’s Cloud and Enterprise Business Group Lead Stephane Consalvi said in an interview with The Express Tribune.The regional head of Microsoft’s cloud and enterprise business for North Africa East Mediterranean and Pakistan, Consalvi has been visiting different cities of Pakistan to explain and market the company’s latest product, Azure, to enterprise customers.Azure is a collection of integrated computing services for storage, data, networking and an application that helps the enterprises move faster, do more and save money, said Consalvi. “It is a Platform-As-A-Service. So basically, it means that you can build any piece of hardware by providing system and employment on demand, without waiting for any hardware to be shipped.”Explaining their new strategy, Consalvi said, “We are now a device and services company. We are building services in the cloud, and you will be able to consume these services with whatever kind of device you are using.”Technology is evolving so rapidly that new versions of products replace older ones in a matter of months, something that might not bode well with the country’s businessmen, usually slow in technology adoption. To this, the Frenchman said Pakistanis are embracing latest technologies in the same way as people in developed markets.“I don’t think that in Pakistan you should underestimate your technological acumen.” He, however, added that everyone has a different pace towards adopting technology. “Even in Europe, common people are not on top of every breakthrough,” he said.“We would love to have bigger operations and events in Pakistan with more resources deployed in the country.” Referring to a conference in Karachi, he said he received some intelligent and interesting questions. “This means that the level of the maturity of the market is pretty good.”Consalvi said he did not see any difference between Pakistan and the much advanced European countries in terms of technology adoption and demand for cloud services. “I have been to Lahore, Karachi and Islamabad and seen many customers who are very tech-savvy and advanced like those in developed countries,” he said. They want to take advantage of the latest innovations and remain well integrated with the global line of modern business applications, simply to ease business, he said.Summarising his observation of the Pakistani market, the Frenchman said, “I can see tremendous opportunities in Pakistan. The new generation of young and talented developers has given us the opportunity to work more actively with the local market. I think, in a span of two to three years, this market will evolve and grow dramatically.”

"The very agenda of social sciences, why and how change occurs in society, was mapped by Ibn Khaldun who produced a coherent body of analysis of why societies rise, peak, and wane. Ibn Khaldun spread himself across so many disciplines and spheres of work, one wonders how so many activities fit into a single CV. Ibn Khaldun was born in 1332 in Tunisia to a family with a tradition of diplomatic service in Spain and the Maghrib, and he initially followed in his family’s footsteps into a diplomatic career that took him to act as lead negotiator in several diplomatic missions, but he fell from favour at court and chose to move to Egypt where he served as a senior judge until his death in 1406."

Ibn Khaldun’s definition of entrepreneurship, such as it is, works well, however. It is anchored in his outlook as a devout Muslim who finds guidance in all things in the Koran. A merchant “strives to make a profit, so that he may spend what God gives him to obtain his requirements and necessities through barter.” This sentence flows so smoothly one might skim over the reference that a merchant’s profits have their source in “what God gives him.” However, the connotation of these words resonates deeply, as the Koran has a term for God’s bounty, rizq, a term which may be the origin of the term we use today to describe that aspect of enterprise that is the quintessence of entrepreneurship: risk.

This whistle-stop tour of Ibn Khaldun’s Muqaddimah is but a sampler of his work but may have said enough to show Ibn Khaldun pushed the boundaries of historical scholarship out into social science. In Europe, Ibn Khaldun’s works reached a wider audience when they were translated in the nineteenth century, at a time when social sciences in Europe even then were in their infancy. But even today, Ibn Khaldun’s work has aged well and his insights often are as fresh as they were when he penned them.

It may have startled some readers to see Ibn Khaldun articulated many notions centuries before they were expressed in the West. The Laffer curve is one example, but there are others, such as John Marshall’s dictum, “the power to tax is the power to destroy (1819),” and William Graham Sumner’s “forgotten man” who ends up bearing tax burdens (1883).

But Ibn Khaldun matters not only as an ideas man ahead of his time. Ibn Khaldun lived through an age of frequent regime changes that threatened corrosion of the Islamic realm from within, and foreign invasions visited devastation across the Middle East. Ibn Khaldun lived in an age of despair but did not much care for a quiet life. On the contrary, he wanted to look threats in the eye, and one of his travels took him to an encounter with the feared warlord Timurlan, a meeting that Ibn Khaldun recorded at length in his autobiography (another of his vast range of works).

If turmoil had an effect on Ibn Khaldun, it must have been as a spur to learn about different societies, and what is urgent today about the achievement of Ibn Khaldun, who did not flinch from engaging with policy-making at the highest (and most dangerous) level, is that he demonstrated how to combine firm religious orthodoxy with irrepressible curiosity in mechanisms of social change.

Dr. Benedikt Koehler is a historian and former banker, specialising in early Islamic economics. Koehler delivered the inaugural lecture for the Legatum Institute’s “History of Capitalism” course.

Facebook’s CEO Mark Zuckerberg has committed to reading an important book every two weeks as part of his 2015 New Year’s resolutions, and up next is “The Muqaddimah,” a 14th century tome written by Islamic historian Ibn Khaldun.

The book, whose title translates to “The Introduction,” traces the progress of humanity while attempting to remove the biases captured in historical records and reveal the universal elements that connect us. It is often considered the most important Islamic history of the premodern world.

Kaldun, a lauded Arab scholar, is credited as one of the foundational thinkers of modern sociology, ethnography, and the philosophy of history.

One reviewer of the original English translation called it, “Undoubtedly the greatest work of its kind that has ever been created by any mind in any time or place … the most comprehensive and illuminating analysis of how human affairs work that has been made anywhere.”

http://time.com/3909132/mark-zuckerberg-islamic-history/

Facebook CEO Mark Zuckerberg’s 2015 New Year’s resolution was to read an important book every two weeks and discuss it with the Facebook community.

Zuckerberg’s book club, A Year of Books, has focused on big ideas that influence society and business. His selections so far have been mostly contemporary, but for his eleventh pick he’s chosen “The Muqaddimah,” written in 1377 by the Islamic historian Ibn Khaldun.

“The Muqaddimah,” which translates to “the introduction,” is an early attempt at stripping away biases of historical records and finding universal elements in the progression of humanity.

Ibn Khaldun’s revolutionary scientific approach to history has established him as one of the foundational thinkers of modern sociology and historiography.

The influential 20th century British historian Arnold J. Toynbee described “The Muqaddimah” as “a philosophy of history, which is undoubtedly the greatest work of its kind that has ever yet been created by any mind in any time or place,” according to the Encyclopedia Britannica.

It’s a history of the world written by an intellectual who lived in the 1300s. It focuses on how society and culture flow, including the creation of cities, politics, commerce and science.

While much of what was believed then is now disproven after 700 more years of progress, it’s still very interesting to see what was understood at this time and the overall worldview when it’s all considered together.

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San Francisco based Cloudcade has announced it will invest $6 million to set up a game development studio in Lahore, Pakistan, according to Venturebeat.

The Lahore studio will be led by Ammar Zaeem, cofounder of Pakistan’s mobile game studio Caramel Tech which already has a team of 50 engineers.
The move is a big investment into Pakistan as a tech hub, and it shows how the game business is expanding around the globe.

Cloudcade:

Founded by Di Huang in 2013, Cloudcade is known for its popular multiplayer game "Shop Heroes" that pits players against each other in a competition to create the best shop they can. If a player can make a better store and perform more tasks than his or her rivals, he or she wins.

The game is available on the Apple iOS App Store, Google Play, Samsung Galaxy Store, Amazon, Kongregate, and Facebook. It is now also supported on the Apple Watch.

43.5% of Indians, the highest percentage in the world, say they do not want to have a neighbor of a different race, according to a Washington Post report based on World's Values Survey.

About Pakistan, the report says that "although the country has a number of factors that coincide with racial intolerance – sectarian violence, its location in the least-tolerant region of the world, low economic and human development indices – only 6.5 percent of Pakistanis objected to a neighbor of a different race. This would appear to suggest Pakistanis are more racially tolerant than even the Germans or the Dutch".

Housing Discrimination:

It appears that there is a small but militant minority in Pakistan that is highly intolerant, but the vast majority of people are tolerant. My own experience as a former Karachi-ite is that there is little or no race or religion based housing segregation, the kind that is rampant in India where Muslims are not welcome in most Hindu-dominated neigh…

The development of JF-17, a modern highly capable and relatively inexpensive fighter jet, is the crowning achievement to-date of the Pakistan-China defense production cooperation. It's being deployed by Pakistan Air Force with Pakistan Aeronautical Complex (PAC). The latest version is capable of launching a variety of nuclear and conventional weapons ranging from smart bombs and air-launched cruise missile Raad to anti-ship missiles.

I am the Founder and President of PakAlumni Worldwide, a global social network for Pakistanis, South Asians and their friends. I also served as Chairman of the NEDians Convention 2007. In addition to being a South Asia watcher, an investor, business consultant and avid follower of the world financial markets, I have more than 25 years experience in the hi-tech industry. I have been on the faculties of Rutgers University and NED Engineering University and cofounded two high-tech startups, Cautella, Inc. and DynArray Corp and managed multi-million dollar P&Ls. I am a pioneer of the PC and mobile businesses and I have held senior management positions in hardware and software development of Intel’s microprocessor product line from 8086 to Pentium processors. My experience includes senior roles in marketing, engineering and business management. I was recognized as “Person of the Year” by PC Magazine for my contribution to 80386 program. I have an MS degree in Electrical engineering from the New Jersey Institute of Technology.
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